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Superior Customer Service Yields Superior Returns

Cognizant Technology Solutions(Nasdaq: CTSH) is a rare bird: a boring technology services company that consistently ranks among the fastest-growing businesses on the market. This morning, Cognizant hit yet another earnings report right out of the park and is once again breaking new ground with all-time-high share prices.

Sales improved by 42% year over year to $1.1 billion, including a 15% sequential gain. GAAP earnings took a smaller 19% leap to $0.56 per share. Both of these key metrics landed far ahead of where Wall Street analysts had expected, and management guidance also beat the consensus by a fair margin -- not that I give much credence to that chicken-and-egg game, but there you go. The stock is up nearly 10% today, making for a cool double in 12 months and more than a 16-bagger over the past decade. If you bought Cognizant shares more than eight years ago, this qualifies as a spiffy-pop as today's gain is larger than your original purchase price.

This is not a sector effect, but a long-running outperformance based on Cognizant's unique strengths. To wit:

Company

10-Year Return

1-Year Return

CAPS Score (out of 5)

Cognizant

1,650%

99%

***

Syntel(Nasdaq: SYNT)

354%

10%

***

Wipro(NYSE: WIT)

161%

52%

***

Infosys Technologies(Nasdaq: INFY)

91%

40%

****

IBM(NYSE: IBM)

17%

9%

****

Computer Sciences(NYSE: CSC)

(26%)

(5%)

****

Sources: Google Finance, Motley Fool CAPS.

So how does Cognizant pull this trick off, beating the competition about the head and neck over both long and short terms? If you ask management, they'll tell you it's all about customer service. Cognizant claims to bend over backward for its customers, even when it doesn't have to. The proof is in the pudding as Cognizant shows the results to back this claim up. It's the same "fanatical support" mantra that makes Rackspace Hosting an official Rule Breaker.

So far, so good. But how much longer can Cognizant take this impressive track record? Our CAPS system seems to say, "Not much longer." The former five-star stock has lost two CAPS stars as share prices skyrocketed over the past two years, and three stars often point to mediocrity going forward.

Do you see any rocket fuel left in Cognizant's tank? Pop on over to CAPS and cast your vote accordingly. Given the sterling customer focus and lengthy record of success, I'm going with a long-term "outperform."